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Embassies pay for devalued dollar

- The Washington Times - Saturday, March 22, 2008

The State Department is losing millions as a result of the free-falling dollar, forcing its overseas missions to lay off local staff, reduce energy consumption, put facility repairs on hold and cancel travel, officials said.

Although the dollar's weakness is affecting embassies and consulates around the world, the most drastic measures are being taken in Europe, where the euro has been trading around $1.54.

"It's beginning to hurt — there is no question about it. It's tough on us," said Christopher R. Hill, assistant secretary of state for East Asian and Pacific affairs.

Another official said that 24 percent of the State Department's main operating account, which is $3.8 billion for 2008, is disbursed in foreign currencies.

"We already have a tight budget, and the buying power of those limited resources is further affected by the decline of the dollar," the official said.

He noted that the department has a "buying power maintenance account" where it puts money when the dollar's value goes up, but "there is no money in it now."

"The biggest impact I have seen is our ability to program events," a Foreign Service officer in Europe said. "We have had to become very creative in finding cost-saving measures."

Public diplomacy programs are among the most affected, officials said.

The officers spoke on the condition of anonymity because they were not authorized to speak to reporters.

"The weak dollar has made it much more expensive to do our work, limiting our ability to travel around the country to monitor events and engage contacts, limiting the number of representational events we can organize for visiting U.S. and host-country officials," said another officer in Europe.

Several officials said the higher cost of maintaining existing facilities abroad reduces the funds available for renovations and new construction.

"We'd like to put in new embassies in some places, but the price tag is going up every day," Mr. Hill said.

A third Foreign Service officer in Europe said that at his embassy "electricity usage is being cut by reducing lighting and turning off hot water heaters."

"We have turned off every other fluorescent light in our offices and hallways," he said. "We can still work, but it feels like permanent sunset."

Another major expense in foreign currency are the salaries of thousands of local employees at U.S. embassies and consulates. The first officer in Europe said that her salary is now lower than that of her assistant, who is a national of the host country.

Still, the officer said that what the assistant makes is "below the salary level [it] should be to be competitive on the local market."

While some posts in Europe are limiting or banning overtime for local employees, others are resorting to freezing pay or even layoffs, officials there said. Layoffs add to the workload of Foreign Service officers, they said.

American diplomats are protected against a sinking dollar by an allowance that goes up when the U.S. currency goes down. That allowance has just been increased in most European countries. In Paris, it jumped from 80 percent to 90 percent of "spendable income," or the amount after taxes, contributions and other payments.

"Given the time it takes to make the adjustment in the salary, you do lose out a bit, but nothing major," an officer in central Europe said.

Several officers said the allowance is less meaningful to junior officers, whose salaries are relatively low. It is also more difficult for those with children, because they buy locally more than others. Most officers make purchases from catalogs that are shipped to them from the United States for no additional charge.

Even though many diplomats said they still live comfortably, they are cutting back on eating out, personal travel and other entertainment. The biggest challenge, they said, are events like weddings, births or other celebrations.

One officer said that his upcoming wedding, with about 100 guests, will easily cost more than $50,000, while a couple of years ago the price tag would have been about $30,000.

"I don't have that kind of money, and I don't make that kind of money," he said. "For this once-in-a-lifetime situation, I'm really struggling."

He added that he could have saved thousands of dollars by having the wedding back home, but he is gay, and gay marriage is illegal in the United States. It is legal in the western European country where he is serving, which is also where his partner is from.

While the cost-of-living allowance of American diplomats in Europe is going up, their European counterparts in Washington said theirs is being reduced.

"At the last adjustment, our 'expatriation bonus' went down about 7.5 percent," one European diplomat said. "We'll lose more money in the coming months."